Memo to Hockey: what’s really wrong with the Tax Office

Joe Hockey wants to shake up the Australian Taxation Office. It’s welcome news to accountants and taxpayers, but he’ll need more than rhetoric to fix the ATO’s problems.

Joe Hockey has just discovered something that most taxpayers already knew: the Australian Taxation Office doesn’t play fair, and is most decidedly not independent.

The Coalition’s shadow treasurer has announced a Tony Abbott government would establish a new parliamentary committee to oversee the ATO, while threatening to split the Tax Office functions of administration and policing. But do the proposed reforms go far enough?

Hockey has been making sounds for a while now that he isn’t happy with how the Tax Office treats small business taxpayers. In yesterday’s post-budget address at the National Press Club, he said:

“If elected a Coalition government will immediately establish a standing parliamentary committee with a singular focus — the oversight of tax administration.”

The first task of the oversight committee would be to set down dates for regular semi-annual public hearings with the tax commissioner, in a format similar to the public hearings with the governor of the Reserve Bank. Sound familiar? Since 2007 the joint committee of public accounts and audit has been holding biannual hearings with the tax commissioner to answer questions about the Tax Office’s administration of the tax system. But in 2011 under the chairmanship of Rob Oakeshott, the committee — which included five Liberals, including Helen Kroger and Alex Somlyay — decided to revert to annual hearings. In explaining the decision, the committee said:

“Due to the expanded scope of the hearing, both in terms of the time needed and the increased number of witnesses giving public evidence, combined with the effort and resources required to complete the preparatory work, the committee has decided to hold future hearings with the tax commissioner annually rather than biannually.”

The committee’s second task would be an inquiry into the most effective organisational structure for independently handling and resolving formal taxation disputes. Hockey has previously raised the idea to completely move the appeals section out of the ATO into a different agency, recognising the audit function is different from an independent review. Yesterday he said:

“The Coalition stands ready to break up the Tax Office, so that its policeman functions are separate to its responsibility for administering the tax system.”

Tony Greco, a senior tax advisor at the Institute of Public Accountants, told Crikey: “Hockey wants to see a better relationship between business and the ATO especially when it comes to dispute resolution. Hockey approved Chris Jordan’s appointment as new ATO head but if he doesn’t see a massive cultural shift he will implement plan B.”

David Hughes from SMH tax lawyers reckons Hockey’s proposals are the most promising thing to happen in Australian tax administration in years. “At the very least, it shows recognition at the highest levels of the Coalition of the appalling track record of incompetence and mismanagement of the ATO’s administrative functions by officers and the resulting loss of faith in Australia’s taxation system,” he told Crikey, adding:

“Hopefully Mr Hockey’s comments will be backed by genuine action if the Coalition forms government. But reviews, parliamentary committees and promises of reform for better relationships will not be enough. The next government must show genuine steps towards rebuilding trust with taxpayers and it can do so by promising to pay meaningful compensation to those taxpayers who have lost so much at the hands of overzealous ATO officers.”

Over the last year Crikey has raised many issues about the actions and accountability of the Tax Office, including the muzzling of taxpayers by forcing them into signing confidentiality clauses in settlement of their cases to cover up errors and potential maladministration of tax officers, breaching the government’s model litigant rules and legal services directions, and using an unlimited legal services budget to bludgeon taxpayers into submission.

Last year the ATO was the biggest spender in the Commonwealth on legal services, spending a whopping $101 million dollars of which $64.9 million was donated to law firms. These issues must be addressed as soon as possible.

One thing Hockey must do if the Coalition wins government is to appoint a strong assistant treasurer — the position with parliamentary responsibility for the ATO — who is prepared to get tough with the tax commissioner. Current Labor Assistant Treasurer David Bradbury is the weakest minister to hold this position on record. A number of times I put questions to him about serious allegations of impropriety and small business being disadvantaged by the ATO only to be told “administrative and operational matters within the ATO are a matter for the commissioner”.

Which just isn’t right. Taxpayers are being disadvantaged and Bradbury didn’t ask one question of the ATO. It is this attitude — of trusting the commissioner’s word that everything is OK — that Hockey must defeat.

I oredered a Ranger last year and it was supposed to be delivered end of March due to “production issues”

Here we are in May and I still haven’t got it.

I don’t know about Ford being able to make cars in Australia but they sure seem to have trouble making them elsewhere and what kind of business model is it when you sell some thing but then don’t deleiver for ages.can’t be good for the cash flow.

As a small business owner who has been on the receiving end of ATO bullying all I can say is it’s about bloody time! There is something wrong when the ATO can apply fines for late lodgement of GST larger the amount owing and charge interest at the same time! Like bank late fees there should be a class action to hold them to account.

Chris Seage must deal with a different group of small businesses from the ones that I have seen in 40 years in small business. Time and again we see businesses that have large unpaid GST, group tax, income tax and superannuation liabilities. They have a huge cash flow advantage over their competitors. They continue trading because of this and incur larger debts with their suppliers before they eventually fail. These liabilities are hidden from creditors because of “privacy” provisions. The remedy is to require the ATO to give trade references and to give the ATO adequate resources to collect the money which is due to their employees and the wider community.

I find this attack on the ATO pretty offensive. In such a complex area trying to handle all the stupid decisions made by our politicians I think they do a good job all things considered. I am a small business owner and I have never had a problem with the ATO, to be honest I think they do a pretty good job even with the few teeth they have.

I’m guessing the ATO spend an extraordinary amount of time chasing outstanding BAS with SOHO operators who in the big scheme of things have relatively small debts.

How about letting businesses with a turnover of $200,000 a year or less opt out? Then the ones who lack the resources to collect GST have a choice instead of being caught in a spiral of fines and interest charges. A simplified BAS would be good as well, 10% on everything would be a good start.

Given the general recognition that the challenge for the developed world is to get big business to pay their taxes, Crikey.com churns out this article that raises all of the prejudices held by some quarters in the business community about the tax office.

I don’t doubt that the issues for taxpayers embroiled in some poorly undertaken audit are serious and the ATO should be held accountable. It is questionable logic to use these instances as a basis for supporting a structure that will ostensibly help business however is more expensive and will reduce the effectiveness of the ATO.

The challenge is not about weakening the tax office but making it work better for the community. Always.

We have seen the invasion of Iraq for revenge against an enemy of Father, and this will be a revange against closure of cousin’s small business. The actual sufferers are the fixed paid employee of the GST base tax system they pay Income Tax +GST ( Double dip).

Sall business claim every expenses including personal expenses as tax exempted expenses. Cash economy is dominated by small businesses, some community follow an ethics that “a dollars comes to the community will not get out without changing seven hands” . These 7 exchanges are without the GST or any income tax. You can see these people if you got to home auction, car auction etc.

The poor fixed income earners has no lobby no money to donate to the poles & their parties . Who is going to ask the polies to reduce their Perks and Jail the crooks like Obeds, Toolboy, Tripody etc etc . All tese ICAC investigation will just costs taxpayers and at the end a big end layers will get them off the hook and we will end up paying compansation.

I don’t know when Chris Seague worked in the ATO but I think he needs an update. I have met a lot of ATO staff, and still yet to meet an ‘overzealous’ one. ATO staff are public servants have no personal interest in what happens to anyone - not Paul Hogan, or any one else who thinks they are above the law.

Hundreds of thousands of audits are done every year and if a small number go wrong it is due to lack of resourcing and poor training - no one is ‘out to get you’. Today’s auditors don’t have time for that – they need to be working on audits that will produce a result. There’s no point wasting time on a path to nowhere when there is another case in the queue.

99% of complaints made in the press are down to paranoia and people’s over developed sense of their own importance. If Joe Hockey or one of his mates has had a bad audit experience, he might want to remember when he is cutting resourcing out of the public service next year, that an auditor under pressure is not doing the best job they could.

Every person who whinges to the press about their ‘unfair treatment’ has already lodged a formal complaint and been to the ombudsman, so whatever could be fixed has been, and anything after that is just sour grapes.

A lot of the problems in the audit areas are the result of insufficient feedback coming from the review areas – not enough time spent on fixing the systemic problems that ARE there. Separating the review areas from audit, even more than they already are, will just make this problem worse.